How much of Walmart’s success is due to NAFTA, and how much is due to Walmart’s
ID: 433645 • Letter: H
Question
How much of Walmart’s success is due to NAFTA, and how much is due to Walmart’s inherent competitive strategy? In other words, could any other U.S. retailer have the same success in Mexico post-NAFTA, or is Walmart a special case?CASE Walmart Goes South Comercial Mexicana S.A. (Comerol one est retail chains, is faced with a serious dilemma. Since Walmart International Division in 119d. By 2016, Walma Walmart's aggressive entry into the Mexican retail mar had expanded to 28 countries outside the United Sta ket, Comerci has found it increasingly dfficult to remain through new-store compettive. Walmart's strong operating presence and low growth stalling in the United saes, Walart is looking to prices since NAFTA's lifting of tarifts have put pressure on international expansion. It currently has more than 110 Comerci and now managenent must determine what the retail units worldwide, of which more than 6.200 are outside of Mexico's larg- i started growing in Mexico, management created whic the continental United States, and it employs more thn What has caused this intense competitive pressure on 800,000 people outside the United States. Nevertheless Comerci, and what is ikely to be its future? Mexico's re-Walmart's success internationalily has varied by tal sector has benefited greatty from the increasing trade It has struggled to match consumer preferences and work berakzation the govenment has been pushing. After de successfully with suppliers in Japan, encountered trouble cades of protectionism, Mexico joined GATT in 1986 to help in the United Kingdom, and failed to turn profits in Ger chain needs to do to compete against Waimart open its economy to new markets. In 1990, with Mexico's many and South Korea, forcing it to withdraw completelySUpp economy on the upswing and additional free trade negotia- from the latter two markets. However, it has flourished in oms tions with the United States and Canada taking place, the Canada and, most notably, in Mexico. Walmart's opera- tions in Canada began in 1994 with the acquisition of 122 with the president of store. Their meeting resulted Woolco stores. It now has more than 400 Walmart stores enjoys strong partnerships with Canadian suppliers in a 50/50 joint venture in the opening in 1991 of Mexico's and in Mexico City. In Mexico, Walmart operates 2,360 units, including Sam's t took only a couple of months after the opening to prove Clubs, Bodegas (discount stores) the store's success-it was breaking all the U.S. records for Superamas (grocery stores), Suburbias Sam's Club. by 1997, Walmart could purchase enough shares to have a con- retailer in the country, followed by Organizacion Soriana, (apparel stores, The JV evolved to incorporate all new stores, and and VIPS restaurants, and it has become the largest trolling interest in Citra. In 2000, the name changed to Walmart de Mexico, SA de C.V, and the ticker symbol to WALMEX Comercial Mexicana (Comerc), and Chendraut. Given its hit-and-miss success rate on the international Prior to 1990, Walmart had never made moves to enter scene, it is natural to wonder how much of Walmart's ti umph in Canada and Mexico has stemmed from its internal Mexico or any country other than the United States. Once Walmart has successfully expanded into Mexico, and ts stores reflect the scale and quality of Walmart's best in the world. The familiar Walmart logo and color scheme are typical of the Walmart stores
Explanation / Answer
How much of Walmart’s Success is due to NAFTA, and how much is due to Walmart inherent competitive strategy? In other words, could any other U.S. retailer have the same success in Mexico post-NAFTA or Walmart is a special case?
Answer
Walmart’s basic strategy to win the markets is offered prices. They offer prices market lower than every other which help them to become a leader. This strategy was supported by NAFTA very much as NAFTA reduced tariffs on American goods sold in Mexico from 10 to 3 per cent. NAFTA encouraged Mexico to improve its transportation infrastructure. Benefits of NAFTA are for every company but Walmart uses them most effectively. Walmart’s inherent competitive strategy was effective for Mexican market.
Time to Enter Market:
Time to enter the market helps a lot. Take the case of South Korea, Wal-Mart has missed a proper timing to enter the Korean market and was unable to capture logistically efficient locations which can allow building an efficient distribution system with the advantage of economies of scale that it enjoyed in the US market. Major Korean retailers had already located their stores in key commercial areas and developed their distribution networks to optimize the merchandising and the retailing operations prior to Walmart’s market entry
The buying behaviour of Residents:
The buying behaviour of a country in which you are working matter a lot. Again take the case of Korea, Wal-Mart expected the Korean consumers to drive to its stores for price shopping as the American consumers do. However, this location strategy did not match well with the Korean consumers’ lifestyle and shopping habits. Korean consumers have substantially different shopping styles and preferences compared to North American consumers. They prefer to purchase smaller units on a more frequent basis and to have accessibility to a store within walking distance.
Korean consumers were quality conscious and tend to be more brand-loyal, less likely to switch to less expensive products. Korean consumers were unwilling to compromise the customer service and the quality for the low price and expected to see salespeople in each aisle of the retail stores and aggressive promotion in the value of service and products offered by the retailers (Ramstad, 2006b)
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